China gold premiums ease as safe-haven buying cools on stimulus hopes

By Rajendra Jadhav and Deep Kaushik Vakil

(Reuters) – Premiums on physical gold in China eased off recent highs this week as safe-haven buying cooled on hopes that stimulus could help the top bullion buyer’s ailing economy.

Chinese dealers sold gold at $20-$38 an ounce premiums over global spot prices, after jumping to $40-$60 last week.

“Despite prevailing pessimism, China’s economy seems to be performing better than perceived,” said Bernard Sin, regional director, Greater China, at MKS PAMP. “This has led to expectations that (gold) import quotas could be introduced sooner rather than later.”

Beijing has ramped up stimulus efforts of late.

But independent analyst Ross Norman said retail buyers were now “largely absent,” given lingering economic concerns, although safe-haven demand for gold bars and coins was robust.

High domestic prices also dented demand to some extent.

Analysts at Citi Research forecast Chinese demand to temporarily ease in the third quarter, also attributing the recent spike in premiums to reduced gold import licenses issued to local banks by the People’s Bank of China.

“Gold is also one way locals can hedge against CNY depreciation. However, it seems policymakers there are intent on at least temporarily curbing gold demand,” Citi said in a recent note.

In India, a near 2% rise in local prices in a fortnight, put off buyers and made dealers offer discounts of about $4 an ounce over official domestic prices — inclusive of 15% import and 3% sales levies. Gold was trading around 59,450 rupees per 10 grams on Friday.

“Demand has been faltering due to the price rise, with most potential customers postponing purchases,” said a Mumbai-based dealer with a private bullion importing bank.

Dealers charged $3 premiums last week.

Jewellers were hesitant to build stocks for upcoming festivals because of volatile prices, said a Kolkata-based bullion dealer.

In Hong Kong, gold changed hands at $2-$3.50 premiums, while Singapore dealers charged $2-$3 premiums.

(Reporting by Deep Vakil, Swati Verma in Bengaluru, Rajendra Jadhav in Mumbai; Editing by Arpan Varghese and Conor Humphries)